* China bonded copper premiums slide $15 to $120-$140 -Shmet
* Worries over copper finance deals continue to weigh on
* LME nickel prices hit 11-month peak on supply concerns
(Adds details, quotes, updates prices)
By Susan Thomas and Eric Onstad
LONDON, March 11 London copper rose on Tuesday
as buyers took advantage of prices that hit their lowest in
eight months on Monday, but rising inventories in China and
little sign of a pick-up in physical demand kept industrial
metals under pressure.
Heavy selling in copper since Friday has not let up on the
Shanghai Futures Exchange, with the most-traded May contract
losing a further 2.2 percent to reach its lowest for 4-1/2 years
Three-month copper on the London Metal Exchange rose
0.27 percent to $6,666.75 a tonne by 1425 GMT - off Monday's
intraday trough of $6,608 a tonne, its lowest since late June.
Barclays analysts noted buying interest at the lower prices
after the two-day fall.
Those falls were partly attributed to concern over waning
appetite for the financing deals that have locked up vast
quantities of copper in China and helped to underpin the price
of the metal.
Much of the copper China imports is used as collateral to
raise funds for China's shadow banking sector, and a lot of
that money has been used to invest in real estate.
Beijing has long tried to tighten credit on financing deals,
which have contributed to rising property prices.
But last week's unprecedented domestic bond default by a
Chinese company implied that even high-yielding debt will no
longer carry an implicit state guarantee. Analysts now expect
more defaults on shadow-banking credit, which would strike at
the heart of copper financing deals.
That default was followed by weaker than expected data at
the weekend, showing that China's exports in February tumbled
18.1 percent from a year earlier, raising questions about the
health of the top commodities buyer.
"I think it's a culmination of China worries," Barclays
analyst Gayle Berry said. "We've had a few weak data points
coming out of China... and then you have concerns about the
financial sector restructuring. That peaked when there was news
that that bond was actually allowed to default."
At the same time, strong imports of commodities, including
copper, in the first two months of the year have boosted
Copper stocks in warehouses monitored by the Shanghai
Futures Exchange have surged by 65 percent since early January
to about 200,000 tonnes CU-STX-SGH.
Physical premiums for bonded metal in Shanghai continued to
slide, dropping $15 to $120-$150 a tonne on Tuesday, according
to China price provider Shmet. (www.shmet.com/)
Investors will be watching for China's industrial production
data later this week.
"Copper will either conclude a significant low, or we'll
continue to get weak data out of China on Thursday and that will
provide us with the conclusion that the outlook should remain
weak," Jonathan Barratt, of Barratt's Bulletin, said.
LME three-month nickel outstripped rises in the
base metals complex and hit an 11-month peak of $15,762 a tonne,
supported by a ban on ore exports from Indonesia, later paring
gains to $15,670, up 1.42 percent.
About $500 million a month in ore and concentrate exports
have stopped since Indonesia's imposition in January of new
mining rules that included a ban on nickel ore. The country was
previously the world's top exporter of the metal.
Zinc was the weakest performer on Tuesday, rising
only 0.16 percent to $2,043.25 a tonne. Zinc gained about 9
percent from early February to early March, but has since slid
along with other base metals.
While many investors expect prices to rally further based on
forecasts that shortages will develop following the closing of
large mines, analyst Jessica Fung at BMO Capital Markets said
that was already in the price.
"BMO Research has adjusted its supply-demand model and
forecasts a relatively tight market in 2014, but zinc prices
appear to already have factored in favourable fundamentals and
there is therefore little price upside near term," she said in a
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin
(Editing by David Evans)